The Cold Stone FDD

"The multi-unit investor has access to regulatory documents as well,
but how useful is the regulatory information for making investment
decisions? Are the other sources and types of information comparable to
what the sophisticated stock investor has available?

A 10(k) and an FDD have some content similarities (e.g., both have
audited statements and descriptions of management). However, a 10(k)
relates directly to the company the sophisticated investor is
considering investing in--whereas an FDD intertwines information about
the franchise system with information about the company that controls
the system that the multi-unit operator is considering investing in.
Thus, an FDD's value as a guide to evaluating a franchise unit
investment is far less than its value as a guide to evaluating the
company that controls the system.

Over the years, the FDD has been seriously misused and misinterpreted
regarding system performance. In my opinion, prospective franchisees,
the media, lenders, and all sorts of experts have tried to infer some
system performance attributes and investment potential from many
sections, most notably Item 19 and Item 20. From a potential investment
standpoint, the information contained in an FDD simply tells a small
portion of the story, particularly as it relates to system performance.
Combined with the absence of the quarterly reports publicly traded
companies are required to issue, an FDD's usefulness to the multi-unit
operator's investment decision process is rather limited." -By Darrell Johnson The FDD Is Not Enough

"The FDD doesn't even give the franchise investor sufficient information upon which to make an
investment decision. The FDD has become more a charade than anything
else.

It tells you what the contract "means" - which people/lawyers who can
read ought to be able to figure out. The contract is now one that no one
in his right mind would ever sign unless there really was a Leprechaun
standing there in a funny hat next to a pot of gold. If you can't
figure that out by simply reading the thing, then you need to go back
into your former glorified clerk lifestyle where you were
euphemistically called "Director of This and That"."